Has experienced several highs and lows
However, the German economy has experienced several highs and lows in the
recent past.
At the start of the new millennium, adverse developments resulting
from reunification threatened to derail the country’s progress and prompted
Germany to be dubbed ‘the sick man of Europe’ by The Economist.
Massive reforms, that remain controversial to this day, were required to put the country
back on track, and the courage to accept this change has paid off since then.
Nevertheless, a rapidly ageing society and the rapid pace of technological
changes continue to pose enormous challenges to the German economy.
A failure to integrate immigrants and their children who have arrived in recent
years could also put the country under immense strain. Even in Germany,
declining growth rates will aggravate distributional conflicts which its society has
handled comparatively well up to now. The more pronounced loss aversion in
an ageing society will make it more difficult to push through reforms, while
populists score some points with seemingly simple solutions.
This risk is arguably even more pronounced in some of Germany’s European partner
countries which remain under strong pressure to adjust, particularly with
Germany expected to remain extremely competitive.
EU Forecast
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